I Made Home Loans When I Was a Little Shaver.

Real Estate Agent with Bill Cherry, Realtor 0124242



Picture of me taken when I was making home loans.


Long before I was out of college, I had begun my business career as a mortgage loan officer; first for a bank, later for another bank and then for a savings and loan.


That was in the days when savings and loans were perfectly set up and governed, so that they could pay a bit more interest on savings accounts than banks could, but were primarily restricted to making one to four family home loans.


Texas had a very strong homestead law.  It was there to keep people from doing dumb things that would risk their family home.  The equity, in the main, couldn't be taken away in bankruptcy.  You couldn't borrow against the equity to buy a new truck or to pay off credit cards..


If you wanted to do home improvements, for an example, you could take out a second lien, however, it had to be for a rather modest amount of money, and the bank was bound by law to make sure that's exactly what that money was used for, even to the point of seeing the receipts and visiting the home after the improvements were made.


From time to time, a fellow --- always, it seemed to me to be a man -- would sit down at my desk and asked that we refinance his home so that he could take out some or all of the equity and use it for another purpose.


An incredible number of them seemed to want to buy a bar or a tavern or a restaurant with their new-found money.  Others saw themselves driving a new Winnebago on their way to fishing trips all over Kingdom Come.


I'd say, "We can't do that, but why don't you tap your savings to buy that bar or Winnebago?" 


The bottom line always was the same:  The equity in their home was the only real asset that they had.  Savings was either minimal or nonexistent. One more reason they shouldn't be allowed to spend their home's equity.


So I'd propose this solution:  "How about you and your wife sell your home, take out all but 5%-10% of the equity, and use that to buy another home and with a new mortgage?  I promise that we'll probably make you that loan.  Then you'll have all of that money to spend as you'd like."


Not one time.  Never once. No, not one time did any of them ever come back after selling their home, and having a contract to buy another.


I always envisioned them telling their wife their plan, and she saying back to him, "Henry, have you lost your mind? No!"


I don't personally think that the current rules and regulations that allow homeowners to borrow against their equity for other purposes is a good thing.  In the main, I don't believe it is in the best interest of the homeowner or the country, for that matter.


Often it seems to leave homeowners with nothing in the end when they really need it.


How do you see it?



Realtor - Broker

Since 1966

Keller Williams Dallas Premier

Direct: 214 503-8563


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Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

I am sure you will get a ton of business from this post...well done and keep it up

Jun 08, 2015 10:39 PM #1
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Bill Cherry, Right you are . They see that home equity as their private ATM.

Not a good strategy.

Bill Roberts

Jun 08, 2015 11:49 PM #2
L. Scott Ferguson
Ask4Ferguson - Your House-SOLD Name in Real Estate - West Palm Beach, FL
Sunny Florida Real Estate Professional

Great read!  I was that person before with my home equity :)



Jun 11, 2015 12:31 AM #3
Nicole Doty - Gilbert Real Estate Expert
Zion Realty - Gilbert, AZ
Broker/Owner of Zion Realty ZionRealtyAZ.com

This is a great post to remind us that not all progress is good. There are business practices in the past that were far better than they are now. 

Jun 11, 2015 01:17 AM #4
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